MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015

SCOPE:
1 Verification of reasonableness /quantity/quality of Stocks and receivables and the
information furnished in the stock statements of the Company as on 31.05.2013 with
the books / other records including excise records of the Company held at
factory/registered office, with special emphasis on value and realisability thereof. The
stocks will need to be examined in terms of moving, non-moving and receivables in
terms of good for recovery and doubtful of recovery.
2

Verification of the system of valuation of stocks adopted by the Company for drawing
up the stock statements, with specific reference to the reasonableness and whether the
same complies with the generally accepted accounting practices, AS-2. The
correctness of valuation and physical quantity of work-in-process shown in the stock
statements are to be commented in detail.

Verification of Book Debts- with comments on their quantity, realisability and ageing
analysis. Receivables not connected to the operations of the Company will have to be
commented upon specifically

Physical verification of inventories (held at the factory and branches/ godowns) as on

a date during the course of audit with reference to the books of the Company and
cross verification with reference to the stock levels at the beginning of the accounting
year, production/ activity levels at the factory and purchases made during the period.
The stocks of raw materials and finished goods may be verified with reference to
excise records also. The correctness and physical quantity of semi-finished goods
shown in the stock statement may be specially commented upon.

Slow moving and obsolete stock details be furnished together with values.

Month-wise cash inflows/sales realization and utilization thereof (in the last 12
months) is to be examined and comments to be made on whether the sales proceeds
have been retained in the WC cycle for units operations.

Maintenance of accounts with any other Bank and interlocking of funds among group
Companies.

Group Company transactions or transactions with other associates/sister Companies,

if any, are to be examined and the impact thereof is to be commented upon.

Unhealthy accounting practices noticed, if any and any other aspect having a bearing
on above points may be reported for our information.

10 Any other matter, in our judgement, which is of interest to the Bank.

11 The above list is only illustrative and not exhaustive. Any other information which in
the view of stock Auditor is relevant and material to be appropriately furnished with
reasoned comments.
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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015
STOCK & RECEIVABLES AUDIT
1. Stock & Receivables Audit of M/S. MEDCHEM ORGANICS PRIVATE
LIMITED
1.1

Conducted on behalf of

State Bank of Hyderabad

Branch Name

KPHB Colony,
Hyderabad.

Name of the Auditors

M/s. Nachiketha,
Hyderabad.

Dates of Visits

From 20.06.2015 to 27.06.2015

Date of completion

28.06.2015.

Place of Visit
Register Office & Corporate Office :

Factory / Work Place

5th floor, Nandana vanam,

Vengalrao nagar,
SR Nagar X Roads.
Hyderabad.
Telangana - 500 038.

Sy.No.405,
Veliminedu Village,
Chityal Mandal,
Nalgonda Dist.,
Telangana - 508114.

Banking Arrangement

Sole Banking

Stock/Receivables
Verified as of

31.05.2015

M/s. MEDCHEM ORGANICS PRIVATE LIMITED was started on 9th april2007 by four professionals with the aim of ORGANIC CHEMICALS can be
converted as AFFORDBLE MEDICINES (MOPL) by acquiring 21.12 acres. The
commercial production actually started from January 2015.
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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015
Promoters List
Mr.A Mohana Krishna
Mr.G.Venkateswara Rao
Mr.S.Ganapathirao
Mr.Ch.Seetaramaiah

- Managing Director.
- Director Projects.
- Executive Director.
- Tech-Director.

STATE BANK OF HYDERABAD, KPHB Colony Branch, Hyderabad sanctioned

the working capital limits of Rs 5.00 Crores. No Non-fund base limits.
The Stock & Receivables Audit of the Company has been carried out in pursuance
of the appointment given by State Bank of Hyderabad, KPHB Colony Branch,
Hyderabad.
1.

Whether the Companys operations are adequate as per the sanctioned limits
of working capital facilities and the impact on Companys
profitability/liquidity.
1.1
1.2

2.

2.1.

3.

4.1.

As per Provisional Balance Sheet of the Company the sales in the year 2012 - 2013
are 7.55 Crores as against Rs.6.63 Crores during the year 2011-2012, indicting
growth of 14% during the year 2012-13.

Accounting policies adopted by the Company and any change in the

accounting policies during the current financial year, which will have a bearing
on the profitability of the Company.
There are no changes in the accounting policies observed during the current
financial year compared to the previous financial year which have an impact on the
profitability of the Company.
Verification & valuation of inventories and examination of receivables by agewise classification and making provision for bad and doubtful debts
Verification of Inventory:
The inventory of the Company mainly comprises of Raw Materials of PP Woven
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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015
Fabrics, Granules, Liners, PP Yarn, PP Woven Sacks etc. and Finished Goods of
HDPE Lam. Fabrics, Bopp Film bags.
Physical Verification of stocks at the factory was conducted on 27th June2015
and the relevant observations are as under.

4.2.

Observations:

It is observed that at the Factory suitable registers indicating in/out of relevant

stock is not maintained. We have verified with stock statement submitted to the
bank as on 31.05.2013 and sales, purchases invoices provided by the company

Physical Verification of inventory did not reveal any major deviations. However
the arrangement of stocks needs improvement for facilitating easy verification.

As per our observation, the Aluminium Pouches, Black Paper are considered to be
Slow moving as they are not moving for the past 6 months:
Particulars
Alu.Pouches
B.Paper
TOTAL
Say Rs. in Crores

4.3.

Qty (in Kgs)

Rate/Kg
4282
8802

Amount (In Rs)

34
145588
32
281664
427252
0.04

Valuation of Inventory:
Valuation of inventory as per the Company is as under:
Raw Materials and Finished goods are valued at lower of Cost or net realisable
value.
It is observed that the Company is adopting the valuation method as stated above.

4.4.

Receivables (Sundry debtors):

4.5

As per the books of accounts of the Company, the receivables as on 31.05.2013 are
Rs.1.36 Crores, out of which Rs.1.22 Crores within the cover period of 90 days and
Rs.0.14 Crores are beyond the cover period. The details of sundry debtors
Ageing analysis given in Annexure-II
STOCKS DECLARED BY THE COMPANY:

The following are the details of Stocks as on 31.05.2013, as declared by the

Company in the stock statement submitted to the Bank:
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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015

Description
Raw Materials
Finished Goods
Total

Rs. In Crores
0.94
0.38
1.32

Raw Materials:
PP Woven Fabrics, BOPP Film Lamination, Granules, Liners, PP Yarn, PP Woven
Sacks etc.

Finished goods:
HDPE Lam. Fabrics, Bopp Film bags.

4.

`
Loans and Advances:
As per books of accounts of the Company there are no loans & Advances.

5.

Sundry Creditors:
As per books of the Company the sundry creditors as on 31.05.2013 are 0.40
Crores. No LC Limit.
Detailed sundry Creditors As given below
Sundry Creditors as on 31.05.2013
Name of the Creditor

Amount (Rs.)

Aavya Industries Pvt Ltd

404852

Adarsh Sacks Pvt Ltd

539141

E-Polymers Pvt Ltd

445406

Karteek Enterprises
Modi Polymers
Pankaj Polytec Pvt Ltd
Pvn Fabrics
Sajjala Woven Sacks

768884
192550
270665
132672
752365

Smart Roto Prints - Cr

71140

S.S Industries
S S V Fab Industries Pvt Ltd
Total
Say Rs in Crores

253200
142710
3973585
0.40

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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015

6.
7.1

Advances to suppliers (Asset):

As per books of accounts of the Company, there are Rs.0.05 Crores advances given
to suppliers. The details as given below
Name of the Supplier
Daman Polythreed (p) Ltd
Sri Ramdas Paper Board
Sai Ram Cotton Prints
Klere Packs ltd
Total
Say Rs. In Crores

7.
8.1
8.

Amount(Rs.)
73146
75000
100000
220651
468797
0.05

Advances from Customers (Liabilities):

As per Books of accounts of the Company there are no advances from the
customers.
CAPITAL WORKS IN PROGRESS:
The position of capital works in progress is as under:
As on 31.03.2012
Nil

9.

As on 31.05.2013
Nil

Investments:
As per books of accounts of the Company there are no Investments by the Company
as on the date of Audit.

10.

Segregation of direct and indirect cost and other income.

The segregation of direct and indirect costs and other incomes is as per norms.

11.

Verification of capitalization of revenue expenditure during the current

financial year.
Nil as on 31.05.2013

12.

Examination of working capital facilities from the Bank and status of the
drawing power requirements.
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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015

13.1

The fund based working capital limits existing as on 31.05.2013 are Rs.1.25 Crores
sanctioned by State Bank of India, there are no Non-fund based limits.

13.2

The sales turnover of the Company is in tune with the working capital limits availed
by the Company.

13.3

The Company submitting DP Requirements along with the monthly Stock Statements
submitted to the Bank
SBI CC A/C
Power Calculation is
Month
Debit
Credit
Annexure-I
April'12
12770455
12658145
May'12
8778000
8525169 status of working
The
June'12
11111710
10834166
capital
limits
as
on
July'12
6787446
6049208
31.05.2013
is
as
Aug'12
10966868
11279316
under:
Sept'12
3439648
3218348
Oct'12
7672687
8140013
Nov'12
5721507
5306817
Dec'12
6772596
6244637 (Rs. In Crores)
Jan'13
4910092 Limits
5005917 Out
standings
Feb'13
11718777
11262253
Nature of
Facility:
SBI
March'13
5303132
6310160
Fund Based
April'13
6523894
6639881
WorkingMay'13
Capital Cash Credit (Hyp.)
1.25
1.12
5678739
5679221
Term Loan Total
0.50
0.16
108155551 107153251
SME Credit
0.25
0.25
Say Plus
Rs.in
Total Fund
Based
(A)
2.00
1.53
Crores
10.82
10.72
Non Fund Based
Letter of Credit
--Bank Guarantee
--Total Non Fund Based (B)
--Total Working Capital (A+B)
2.00
1.53

13.4
Drawing
furnished
in
13.

14.

Debit and Credit summation in the Bank account

15.1

The Companys Month Wise debit and credit summations for the period April 2012
to May 2013 is as under:
(Amount in Rs.)

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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015

It observed from above its sales routed through Cash Credit account only.
15.

Observations on the payment of statutory dues like professional Tax, Sales

Tax, TDS, Service Tax, Excise Duty and Income Tax as on 31.05.2013.
In
the
Company
ESI, PT,
are
the
Excise
Company
paid
statutory
Excise

16.

Month
April'12
May'12
June'12
July'12
Aug'12
Sept'12
Oct'12
Nov'12
Dec'12
Jan'13
Feb'13
March'13
April'13
May'13
Total
Say Rs. in
Crores

the
sales
on 31.05.2013.
17.1

Purchases as
Sales as per
books
per books
7904000
6605680
8055763
5949229
7815309
4922460
7011455
5212722
5358770
3829183
3273423
3600852
4651642
4206020
4182594
3923977
6106745
4029417
6396907
3277856
6456227
5319297
8255474
7852369
7052905
4431172
6806636
7793836
89327520
70954070
8.93

7.10

view of nature of
activity of the
payment of PF,
TDS
not applicable to
Company except
Duty and Vat. The
was
regularly
all
dues regarding to
Duty and Vat.

Observations on
verification
of
and purchases as

Sales during the current financial year i.e. for the months April2012 to
May2013 is Rs.8.93 Crores.
Break up of month wise sales and purchases as per books during the period April
2012 to May 2013 is as under.
(Amount in Rs.)

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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015

The sales and purchases as per books and as per Vat returns are tallied with
marginal difference.

17.

Verification of books of accounts/interlocking of funds among group

Companies and transactions with associate Companies.
There are no sister/group Companies for the Company.

18.

Observations on the insurance coverage and its validity/risks covered of the

Company total inventories.
The particulars of insurance policies obtained by the Company are as under:
Policy no. 0000000000641939
The stocks stored in the godown storage have been insured for Rs.1.75 Crores and
insurance for fixed assets Rs.1.00 Crore. The policy covers normal industrial risks
and valid up to 08.12.2013.Bankers clause is duly notified in the policy.
Observations:

As per the stock statement submitted to the bank as on 31.05.2013, the Stocks of
the company lying in the factory site are Rs. 1.32 Crores. The stocks are insured
for Rs.1.75 Crores under standard fire and special perils policy, indicating
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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015
adequate insured.

The building is insured for Rs.0.25 Crores as against net value of Rs.0.38 Crores
as on 31.05.2013, indicating inadequate insurance.

The Plant and Machinery are insured for Rs. 0.75 Crores as against net value of
Rs.0.47Crores as on 31.05.2013, indicating adequate insured.

The insurance policy is in force.

19.

Legal issues:
Suits filed against the Company / by the Company:
The books of the Company did not indicate suits filed by the Company or against the
Company. The Company also confirmed the same.

20.

Filing of charges:
It is observed that the company has filed all charges in respect of Working Capital
limits availed from the banks State Bank of India

21.

Observations on the overall functioning of the Company:

22.1

The Companys performance is indicating growth year by year.

22.2

The placement of of Stocks needs improvement and streamlining.

22.3

The Stock registers indicating in/out of relevant stock to be maintained &

streamlined at Factory.

22.4

It is observed from the companys books of accounts that the company is maintaining
current account as under.
(Amount in Rs.)
S.No
Name of the Bank/Branch Balance as on 31.05.2013
1
SBI CA A/C,Lallaguda
20,016

22.

Suggestions to the bank:

23.1

The Companys net profit during the year 2012-13 is not commensurate with the
huge growth in sales, reportedly increase in administrative expenses. This as per
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MEDCHEM ORGANICS PRIVATE LIMITED

Stock and Receivables Audit June2015
needs close monitoring.
23.2

The Company to be followed up for proper maintenance of Stock records at Factory.

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